Analysis of Government Support for Public Broadcasting and Other Culture in Canada

Nordicity

Prepared for CBC|Radio-Canada

April 2011

About Nordicity

Nordicity Group Ltd. (www.nordicity.com), founded in 1979, is a strategy consulting firm for clients in the media and entertainment, culture, and communications sectors. Our consultants work with clients in both the private and public sectors to make business and policy decisions, and to understand the impacts of policy and regulatory developments. Nordicity helps businesses make strategic decisions; we also address regulatory and government policy issues for firms, consortia, and industry associations. Our consultants provide clients with strategic planning, business case analysis, market assessment and forecasting, economic analysis, financial modelling, program evaluation, and other tools for strategic and operational decision making. Nordicity has offices in Toronto, Ottawa and London (United Kingdom), and provides global delivery of its expertise through affiliations with international professional services firms.

Table of Contents

1.! Introduction 4! 2.! International Comparison of Public Broadcasters 4!

2.1! Public funding for public broadcasters 4! 2.2! Commercial revenues 5! 2.3! Advertising revenues 8! 2.4! Public funding by type of funding tenure 12! 3.! The Potential Benefits of Public Broadcasting 13! 4.! The Federal Government’s Economic Support for Culture 14! References and Data Sources 16! Appendix A - Statistics for Public Broadcasters 18! Appendix B - Potential Benefits Analysis 23! Appendix C - Estimation of Annual Revenue Impact of Sim Sub 30! Appendix D - Estimation of Value of Section 19.1 34! Appendix E - Statistics for Federal Government Expenditures 39!

1. Introduction In the following report, Nordicity Group Ltd. (“Nordicity”) provides an update to the study entitled, Analysis of Government Support for Public Broadcasting and other Culture in Canada, first prepared for CBC|Radio-Canada in June 2006 and updated January 2009.1 We also provide additional statistics and analysis of public broadcasters’ commercial and advertising revenues, operating expenditures, and new- platform revenues and expenses. 2. International Comparison of Public Broadcasters 2.1 Public funding for public broadcasters Among 18 major Western countries, Canada had the third-lowest level of public funding on a per-capita basis for its public broadcaster, in 2009. At $34 per inhabitant (all amounts in Canadian dollars, unless indicated otherwise), Canada’s level of funding was only ahead of New Zealand and the United States (U.S.). Canada’s funding for public broadcasting was some 60% less than the $87 average across the 18 Western countries. And Canada’s level of funding was about one-fifth of the level of the leading country in terms of public funding, Norway, where the public broadcasting, NRK, received the equivalent of $164 per capita in 2009. Figure 1 Per capita public funding for public broadcasters, 2009*

Norway 164 Switzerland 155 Germany 147 Denmark 142 Finland 116 U.K. 111 Sweden 106 Austria 99 Spain** 81 Belgium 79 France 78 Ireland 71 Japan 62 Australia 44 Italy 43 Canada 34 Average = 87 New Zealand 27 U.S. (2008) 4

0 20 40 60 80 100 120 140 160 180 C$ per inhabitant

Source: See References and Data Sources and Appendix A for list of data sources and additional detail; exchange rates from Bank of

1 Due to changes in data sources, methodology, and exchanges rates, the public funding statistics for certain countries in this report are not comparable to statistics in the January 2009 and June 2006 reports.

Canada; population data from Population Reference Bureau. * Data for 2009 fiscal year unless indicated otherwise ** Figures for Spain include an estimate for the public broadcasters of the autonomous regions. 2.2 Commercial revenues In this section, we examine the extent to which public broadcasters in the 18 comparison countries earned revenues from commercial sources in 2009, including the sale of television and radio advertising airtime, the sponsorships of television and radio programming, and income earned from the licensing of programming to other broadcasters, publishing and merchandise (DVD) sales. Among the 18 comparison countries, there were two countries where public broadcasters did not earn any commercial revenues. Public broadcasters in Sweden and Denmark reported that they did not earn any revenues from commercial activities in 2009: all of their income was derived from public-funding sources, namely television and radio licence fees levied on households and businesses. The majority of comparison countries earned anywhere from 1% to 33% of their total revenue from commercial activities in 2009. Four countries – Ireland, Italy, the United States (U.S.) and New Zealand – relied upon commercial activities to generate one-half to two-thirds of their total public broadcasting revenues in 2009. Figure 2 Commercial revenues as a share of total public broadcaster revenues, 2009*

New Zealand 66% U.S. (2008) 60% Italy 48% Ireland 47% Canada 33% United Kingdom 32% Belgium 28% Austria 23% Switzerland 22% Spain** 21% France 21% Australia 18% Germany 18% Norway 4% Finland 2% Japan 1% Sweden 0% Denmark 0%

0% 20% 40% 60% 80% 100% Share of total public broadcasting revenues

The two countries where public broadcasters did not earn commercial revenues in 2009 – Denmark and Sweden – were in the top half of countries in terms of public funding per capita.

Figure 3 Commercial revenues and public funding per capita, 2009*

Norway 164 Switzerland 155 Germany 147 Denmark 142 Finland 116 U.K. 111 Sweden 106 Austria 99 Spain** 81 Belgium 79 France 78 Ireland 71 Japan 62 Australia 44 Italy 43 Commercial revenues >0

Canada 34 Commercial revenues = 0 New Zealand 27 U.S. (2008) 4

0 20 40 60 80 100 120 140 160 180 C$ per inhabitant

Across the 18 comparison countries, we obtained data for 32 individual public broadcasters or organizations of public broadcasters.2 On a broadcaster-by-broadcaster basis, seven broadcasters earned 40% or more of their revenues from commercial activities in 2009. This group of seven broadcasters included the government-owned Channel 4 in the United Kingdom (U.K.), which relied entirely upon advertising and commercial activities to fund its broadcasting operations. This group also included public television and radio broadcasters in the U.S., which collected the majority of their revenues from individual, corporate and institutional donations, and program sponsorships. The majority of public broadcasters – 27 in total – earned between 0% and 33% of their total revenues from commercial activities in 2009. Five public broadcasters, including the three public broadcasters in Sweden, earned no commercial revenues in 2009. Figure 4 Commercial revenues by individual public broadcaster or organization, 2009*

Channel 4 (UK) 100% TVNZ (New Zealand) 78% US public radio (2008) 74% US public television (2008) 54% RAI (Italy) 48% RTE (Ireland) 47% RTVE (Spain) 44% CBC|Radio-Canada 33% VRT (Belgium-Flanders) 29% RTBF (Belgium-Wallonia) 26% SBS (Australia) 24% France Televisions 23% ORF (Austria) 23% SRG-SSR (Switzerland) 22% BBC (UK) 20% ARD (Germany) 20% ABC (Australia) 17% ZDF (Germany) 13% RNZ (New Zealand) 10% Radio France 10% Autonomous broadcasters (Spain) 10% RFI (France) 6% NRK (Norway) 4% Maori Television (New Zealand) 4% S4C (UK) 3% Yleisradio (Finland) 2% NKH (Japan) 1% UR-Educational (Sweden) 0% Sveriges Radio (Sweden) 0% Sveriges Television (Sweden) 0% Deutschlandradio (Germany) 0% Danmarks Radio 0%

0% 20% 40% 60% 80% 100% Share of total revenues

Source: Nordicity analysis of annual reports of public broadcasters; see References and Data Sources and Appendix A for additional detail. * Data for 2009 fiscal year unless indicated otherwise

2 Examples of organizations of public broadcasters include the group of autonomous region public broadcasters in Spain and the public broadcasting system in the U.S. comprised of local PBS affiliates (public television) and National Public Radio (NPR) affiliates (public radio).

2.3 Advertising revenues

In this section, we confine our analysis of public broadcasters’ commercial revenues to advertising and program-sponsorship revenues; we exclude the revenues earned from other commercial activities such program licensing and DVD sales. While public broadcasters in 15 of the 18 comparison countries earned some amount of commercial revenues in 2009, a slightly smaller subset comprised of 13 countries were home to public broadcasters that earned commercial revenues from the sale of advertising airtime or program sponsorships. The Scandinavian countries – Sweden, Norway, Finland and Denmark – along with Japan were the only countries where public broadcasters did not earn any advertising and sponsorship revenues in 2009. It is important to note that these statistics are for 2009 and do not reflect limits on the sale of advertising that governments in certain countries placed on their public broadcasters in recent years. In 2009, France announced that France Télévision would no longer be permitted to sell advertising beginning in 2010. In Spain, the central government’s limit on RTVE’s sale of advertising took effect in the third quarter of 2009. It is also important to note that in countries where there are several public broadcasters, one public broadcaster may be banned from earning advertising revenues, while the other broadcaster might still be permitted to do so. The U.K. is an example of such a situation: BBC is not permitted to sell advertising, while the government-owned Channel 4 is permitted to sell advertising. New Zealand’s public broadcasters were the most reliant on advertising and sponsorship revenues in 2009; these sources accounted for 65% of total revenues. Advertising and sponsorship revenues were also important for public broadcasters in Ireland and Italy. For 10 of the 18 comparison countries, advertising and sponsorship revenues contributed between 4% and 23% to public broadcasters’ total revenues.

Figure 5 Advertising and sponsorship revenues as a share of total public broadcaster revenues, 2009*

New Zealand 65% Ireland 38% Italy 31% Austria 23% Spain** 21% Switzerland 19% Canada 18% Belgium 15% U.S. (2008) 15% United Kingdom 12% France 12% Germany 6% Australia 5% Sweden 0% Norway 0% Japan 0% Finland 0% Denmark 0%

0% 20% 40% 60% 80% 100% Share of total public broadcasting revenues

Source: Nordicity analysis of annual reports of public broadcasters; see References and Data Sources and Appendix A for additional detail. * Data for 2009 fiscal year unless indicated otherwise ** Figures for Spain include an estimate for the public broadcasters of the autonomous regions. While the countries where public broadcasters did not earn advertising and sponsorship revenues also tended to have higher rates of per capita public funding for their public broadcasters, the correlation was not perfect. Indeed, several countries with very high rates of public funding, including Switzerland, Germany, the U.K. and Austria, also permitted their public broadcasters to earn advertising revenues.

Figure 6 Advertising and sponsorship revenues and public funding per capita, 2009*

Norway 164 Switzerland 155 Germany 147 Denmark 142 Finland 116 U.K. 111 Sweden 106 Austria 99 Spain** 81 Belgium 79 France 78 Ireland 71 Japan 62 Australia 44 Italy 43 Advertising and sponsorship revenues >0

Canada 34 Advertising and sponsorship revenues = 0 New Zealand 27 U.S. (2008) 4

0 20 40 60 80 100 120 140 160 180 C$ per inhabitant

Among the 32 individual public broadcasters in the 18 comparison countries, 20 earned advertising or sponsorship revenues in 2009. The government-owned Channel 4 in the U.K. had the highest share of revenues, 85%, from advertising and sponsorship. Advertising and sponsorship revenues also accounted for more than three-quarters of total revenues at TVNZ (New Zealand), and over 30% of revenues at RTVE (Spain), RTE (Ireland) and RAI (Italy). For approximately one-half of public broadcasters, advertising and sponsorship revenues comprised between 1% and 23% of total revenues. Figure 7 Advertising and sponsorship revenues by individual public broadcaster, 2009*

Channel 4 (UK) 85% TVNZ (New Zealand) 78% RTVE (Spain) 44% RTE (Ireland) 38% RAI (Italy) 31% ORF (Austria) 23% US public radio (2008) 22% SBS (Australia) 21% SRG-SSR (Switzerland) 19% CBC|Radio-Canada 18% RTBF (Belgium-Wallonia) 18% France Televisions 14% VRT (Belgium-Flanders) 13% US public television (2008) 12% Autonomous broadcasters (Spain) 10% ZDF (Germany) 7% Radio France 6% ARD (Germany) 6% Maori Television (New Zealand) 4% RFI (France) 1% S4C (UK) 0% BBC (UK) 0% UR-Educational (Sweden) 0% Sveriges Radio (Sweden) 0% Sveriges Television (Sweden) 0% NRK (Norway) 0% RNZ (New Zealand) 0% NKH (Japan) 0% Deutschlandradio (Germany) 0% Yleisradio (Finland) 0% Danmarks Radio 0% ABC (Australia) 0%

0% 20% 40% 60% 80% 100% Share of total revenues

Source: Nordicity analysis of annual reports of public broadcasters; see References and Data Sources and Appendix A for additional detail. * Data for 2009 fiscal year unless indicated otherwise

2.4 Public funding by type of funding tenure In this section, we compare the per capita public funding for public broadcasters in terms of the type of funding-settlement tenure they operate under. We classify each public broadcaster into one of two funding-settlement categories: annual or multiyear. We find that three of the top five countries in terms of per capita public funding operated with multiyear funding settlements in 2009 for their public broadcasters. However, we also found that three of the bottom five countries in terms of per capita public funding also operated with multiyear funding settlements in 2009. Overall, 10 of the 18 counties maintained annual funding settlements for their public broadcasters in 2009. The average per capita funding across these ten countries was $79. The other eight countries maintained multiyear funding settlements for their public broadcasters. Across these countries, the average rate of per capita public funding was $96. Figure 8 Per capita public funding, by funding-settlement 2009*

Norway 164 Switzerland 155 Germany 147 Denmark 142 Finland 116 U.K. 111 Sweden 106 Austria 99 Spain** 81 Belgium 79 France 78 Ireland 71 Annual funding Japan 62 Multiyear fundind Australia 44 Italy 43 Canada 34 Averages Annual funding = $79 New Zealand 27 Multiyear funding = $96 U.S. (2008) 4

0 20 40 60 80 100 120 140 160 180 C$ per inhabitant

Source: See References and Data Sources and Appendix A for list of data sources and additional detail; exchange rates from Bank of Canada; population data from Population Reference Bureau. * Data for 2009 fiscal year unless indicated otherwise ** RTVE only

3. The Potential Benefits of Public Broadcasting As a further element in making an international comparison, Nordicity assessed the socio-cultural environment in each of the 18 Western countries included in its analysis and postulated the potential benefits to a country that a public broadcaster could provide. Nordicity then rated each of the 18 Western countries in terms of how valuable these benefits would be to that country. Nordicity’s numerical scoring of these the potential benefits from public broadcasting are presented in Figure 9 (below); additional details on the scoring methodology can be found in Appendix B. We compared each country’s potential-benefits rating to its per-capita level of public funding for public broadcasting. The resulting plot (Figure 9) shows that Canada has one of the lowest levels of government financial support for public broadcasting, despite the fact that it has a socio-cultural environment that is likely to generate relative high potential benefits from public broadcasting. Figure 9 Comparison of potential benefit and funding of public broadcasting

180

Low potential benefit Norway High potential benefit High funding High funding 160 Denmark Switzerland 140 Germany U.K.

120 Finland

100 Sweden Austria Spain 80 Belgium France

Per capita public fundingpublic capita Per Ireland 60 Japan

40 Australia Italy Canada

20 Low potential benefit New Zealand High potential benefit Low funding U.S. Low Funding 0 0 5 10 15 20 25 30 Index of potential benefit of public broadcasting

Source: Nordicity analysis, PRS Group Inc. and EurodataTV.

4. The Federal Government’s Economic Support for Culture A comparison of the trends between 19913 and 2009 in overall federal government program spending (excluding national defence and debt payments) and different types of federal government support for culture, including CBC|Radio-Canada indicates that: ! Federal government support for the CBC|Radio-Canada (including direct and indirect support) increased by 8%. ! Federal government spending on other culture (excluding the CBC|Radio-Canada) increased by 71%. ! Total federal government spending (excluding national defence and debt payments) grew by 83%. ! The total revenue impact of indirect government support for private broadcasters (under the high-impact scenario) grew by 59%; under the low-impact scenario, the revenue impact grew by 48%. Note that the value of indirect government support for private broadcasters fell by approximately 11% between 2007 and 2009 (from an index value of 180 to 159, in high-impact scenario). This 11% drop was a direct result of the 11% drop in the advertising revenues of English-language private conventional television broadcasters during this period. Figure 10 Federal government expenditures and economic support of culture, 1991 = 100

190 Total federal government spending (4) 180

170 Other culture (2) Indirect benefits to 160 private broadcasters (HIGH scenario) (1) 150 Indirect benefits to 140 private broadcasters (LOW scenario) (3) 130 1991=100 120

110 CBC|Radio-Canada (5) 100

70 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Fiscal/Broadcasting year ending in

Source: Nordicity calculations based on data from Statistics Canada, CANSIM, matrix 325-0002; CRTC; Donner and Lazar; and CBC|Radio-Canada.

(1) Indirect benefits to private broadcasters (HIGH scenario) are the sums of estimates for simultaneous substitution and section 19.1.

3 In this section we have reverted to single-year denominations, e.g., 1996, to account for different year-ends for federal government financial statistics and broadcasting sector statistics. The former have a March 31 year-end; the latter have an August 31 year-end. The term 1996 refers to statistics from the government fiscal and broadcasting years ending in 1996.

(2) Other culture includes all federal government expenditures on culture and broadcasting, excluding payments to CBC|Radio- Canada. (2) Indirect benefits to private broadcasters (LOW scenario) are the sums of estimates for simultaneous substitution and section 19.1. (4) Total federal government spending includes all spending except for national defence and debt payments. (5) CBC|Radio-Canada includes annual parliamentary appropriation and estimate of indirect benefit of section 19.1.

References and Data Sources Donner, Arthur and Fred Lazar. An Examination of the Financial Impacts of Canada’s 1976 Amendment to Section 19.1 of the Income Tax Act (Bill C-58) on U.S. and Canadian Broadcasters. Department of Communication. January 1979. Donner, Arthur and Mel Kilman. Television Advertising and the Income Tax Act: An Economic Analysis of Bill C-58. Prepared for the Department of Communications, November 1983. Donner, Arthur. An Analysis of the Importance of U.S. Television Spillover, Bill C-58 and Simulcasting Policies for the Revenues of Canadian TV Broadcasters. Taskforce on Broadcasting. February 1986 (mimeograph). Donner, Arthur. The Financial Impacts of Section 19.1 of the Income Tax Act (Bill C-58) and Simultaneous Substitution. Her Majesty the Queen in Right of Canada as represented by the Minister of Communications. 1990. Donner, Arthur and Fred Lazar. Cable, Canadian Program Production and the Information Highway. Discussion paper prepared for the CCTA. August 1994. Donner, Arthur and Fred Lazar. The Financial Effects of Simulcasting on Canadian TV Broadcasters. June 1997.

Table 1 Data sources for international comparison

Country Data Sources Australia Australian Broadcasting Corporation, Annual Report 2010 Special Broadcasting Service, Annual Report 2009/10 Special Broadcasting Service, Special Broadcasting Service Corporation: Agency resources and planned performance (2008-09); http://www.dbcde.gov.au/__data/assets/pdf_file/0009/83691/PBS_2008- 09_SBS.pdf New-platform data for Special Broadcasting Service, supplied by Bruce Meagher, Special Broadcasting Service. Austria ORF, Geschaftsbericht 2009; http://kundendienst.orf.at/publikationen/gb_2009.html Belgium VRT, Jaarverslag 2009; http://www.vrt.be/en/task RTBF Rapport Annuel 2009; http://www.rtbf.be/entreprise/rtbf-groupe/entreprise_rapport- annuel?id=3485 Canadian CBC|Radio-Canada Denmark Nordicity calculations based on data from: http://www.dr.dk/OmDR/About DR/20061123155622.htm Finland YLE, YLE’s Year 2009; http://avoinyle.fi/www/en/liitetiedostot/yle_annualreport_2009.pdf YLE, Financial Statements 08; http://avoinyle.fi/www/en/liitetiedostot/financialstatements_08ENG.pdf France France Télévisions, Rapport annuel 2009 Radio France, Rapport d’activité 2009 Radio France Internationale, Annual Report 2009 http://www.senat.fr/rap/a08-102-8/a08-102-8.html http://www.ddm.gouv.fr/article.php3?id_article=1245 http://www.ddm.gouv.fr/article.php3?id_article=1247 Germany http://www.gez.de/ ZDF, “ZDF facts and figures,” http://www.zdf.com/index.php?id=181 ZDF, “II. Haushaltsplan 2010,” http://zdf-jahrbuch.de/2009/finanzen/haushaltsplan_2010.php ARD, Operations 2009 (English) Ireland RTE, Annual Report and Group Financial Statements 2009

Country Data Sources Italy RAI Group, Reports and Financial Statements 2009 Japan NHK Annual Report 2009 (in Japanese only) New NZ On Air, Annual Report for year ended 30 June 2010 Zealand TVNZ, Interim Report Financial Year 2010 Radio New Zealand, Annual Report 2009-2010 Maori Television, Annual Report of Maori Television for the Year Ended 30 June 2009 Norway NRK, Arsregnskap 2009 Spain Europa Press, “IV Informe Económico sobre la Televisión Pública en España de Deloitte,” November 15, 2010; http://www.periodistadigital.com/periodismo/tv/2010/11/15/television-publica-2009-144-euros- hogar.shtml Sweden Sveriges Television, Arsredovisning 2009 Sveriges Radio, Verksamhet och Arsredovisning 2009 UR, Verksamhet Berattelse 2009 Switzerlan SRG SSR, “Key figures from the 2009 financial statements,” d http://www.srgssr.ch/fileadmin/pdfs/Key%20figures%20from%20the%202009%20annual%20financial%2 0statements.pdf United BBC, Full Financial and Governance Statements 2009/10 Kingdom Channel 4, Annual Report 2009, http://2009report.channel4.com/ S4C, Annual Report Statement of Accounts 2009 United Corporation for Public Broadcasting, Public Broadcasting Revenue Fiscal Year 2008, September 2009 States National Public Radio, “Public Radio Finances,” http://www.npr.org/about/aboutnpr/publicradiofinances.html

Appendix A - Statistics for Public Broadcasters To construct the comparison of per-capita funding for public broadcasters, we collected and totalled the amounts of public funding in 2009 (or the most recent year for which data were available) for each country’s public broadcasters. We included all types of funding that were determined by some branch of the government, including television/radio licence fees and any forms of direct government aid or grants. We converted the public-funding amounts to Canadian dollars using the average exchange rate for 2009. We then divided this Canadian dollar amount by the population of each country. This process yielded a per-capita comparison of the level of public funding for public broadcasters in the 18 countries.. Table 2 Calculation of per-capita public funding levels

Public funding Total public Exchange rate Total public per capita funding in home (C$ per foreign Population funding in C$ 2009* currency currency) ($) Australia A$1,122,199,000 0.8669 972,570,553 21,900,000 44.42 Austria €503,900,000 1.5855 798,933,450 8,400,000 99.36 Belgium €534,969,827 1.5855 848,194,661 10,800,000 78.54 Canada (CBC) $1,140,000,000 1.0000 1,140,000,000 33,700,000 33.83 Denmark Dkr.3,671,824,825 0.2129 781,731,505 5,500,000 142.13 Finland €387977,100 1.5855 615,137,692 5,300,000 116.06 France €3,071,860,000 1.5855 4,870,434,030 62,600,000 77.80 Germany €7,604,200,000 1.5855 12,056,459,100 82,000,000 147.03 Ireland €200,217,000 1.5855 317,444,054 4,500,000 70.54 Italy €1,645,400,000 1.5855 2,608,781,700 60,300,000 43.26 Japan ¥653,372,443,000 0.0122 7,971,143,805 127,600,000 62.47 New Zealand NZ$161,473,000 0.7193 116,147,529 4,300,000 27.01 Norway Nkr.4,325,038,000 0.1815 784,994,397 4,800,000 163.54 Spain €2,390,400,000 1.5855 3,789,979,200 46,900,000 80.81 Sweden Skr 6,600,634,000 0.1493 985,474,656 9,300,000 105.97 Switzerland Sfr.1,153,200,000 1.0505 1,211,436,600 7,800,000 155.31 U.K. £5,171,969,000 1.7800 9,206,104,820 61,800,000 110.78 U.S. US$1,139,249,000 1.1420 1,301,022,358 306,800,000 4.24 Average $87.73 Source: See References and Data Sources for list of data sources; exchange rates from Bank of Canada; population data from Population Reference Bureau. * Data for 2009 fiscal year unless indicated otherwise. Notes: Australia includes funding for ABC and SBS. Belgium includes funding for Flemish-language public broadcaster (VRT) and French-language public broadcaster (RTBF). Germany includes public funding for ZDF, ARD, Deutschlandradio and other public broadcasters in the lander. Spain includes public funding for RTE and estimates for public funding of public broadcasters for the autonomous regions. U.K. includes public funding for BBC and S4C.

Table 3 Public broadcasters’ revenues, 2009*

Revenues (home currency) Share of total revenues Home Advertising Advertising Country Broadcaster cur- Commercial and Commercial and rency Total revenues sponsorship revenues sponsorship revenues revenues ABC A$ 1,099,318,000 184,260,000 0 17% 0% Australia SBS A$ 268,135,000 77,842,000 77,842,000 29% 29% Total A$ 1,367,453,000 262,102,000 77,842,000 19% 6% Austria ORF € 950,700,000 222,800,000 222,800,000 23% 23% VRT € 444,318,000 127,200,000 59,022,000 29% 13% Belgium RTBF € 314,327,650 83,176,154 55,111,000 26% 18% Total € 758,645,650 210,376,154 114,133,000 28% 15% CBC|Radio- Canada Canada $ 1,710,000,000 567,000,000 309,000,000 33% 18% Denmark Danmarks Radio Dkr. 3,671,824,825 0 0 0% 0% Finland Yleisradio € 394,263,300 6,286,300 0 2% 0% France Televisions € 3,118,100,000 723,800,000 430,900,000 23% 14% France Radio France € 594,483,000 60,541,000 38,425,000 10% 6% RFI € 132,770,000 8,206,000 1,000,000 6% 1% Total € 3,845,353,000 792,547,000 470,325,000 21% 12% ZDF € 2,049,000,000 275,000,000 134,000,000 13% 7% ARD € 6,766,625,000 1,353,325,000 405,997,500 20% 6% Germany Deutschlandradio € 214,561,782 0 0 0% 0% Total € 9,030,186,782 1,628,325,000 539,997,500 18% 6% Ireland RTE € 374,921,000 174,704,000 140,622,000 47% 38% Italy RAI € 3,177,800,000 1,532,400,000 988,500,000 48% 31% Japan NHK ¥ 000s 665,866,661 8,710,641 0 1% 0% TVNZ NZ$ 384,786,000 298,404,000 298,404,000 78% 78% RNZ NZ$ 38,200,000 3,964,000 0 10% 0% New Zealand Maori Television NZ$ 35,720,000 1,353,000 1,353,000 4% 4% Total NZ$ 458,706,000 303,721,000 299,757,000 66% 65% Norway NRK Nkr. 4,499,977,000 174,939,000 0 4% 0% RTVE € 1,012,600,000 448,200,000 448,200,000 44% 44% Regional Spain broadcasters € 2,124,800,000 212,625,000 212,625,000 10% 10% Total € 3,137,400,000 660,825,000 660,825,000 21% 21% Sveriges Television Skr. 4,006,000,000 0 0 0% 0% Sweden Sveriges Radio Skr. 2,274,800,000 0 0 0% 0% UR-Educational Skr. 319,834,000 0 0 0% 0% Total Skr. 6,600,634,000 0 0 0% 0% Switzerland SRG-SSR Sfr. 1,563,100,000 344,500,000 294,200,000 22% 19% BBC £ 4,790,400,000 976,500,000 0 20% 0% Channel 4 £ 830,300,000 830,300,000 706,700,000 100% 85% U.K. S4C £ 104,947,000 3,475,000 0 3% 0% Total £ 5,725,647,000 1,810,275,000 706,700,000 32% 12% US public television (2008) US$ 1,881,130,000 1,015,068,000 228,616,000 54% 12% U.S. US public radio (2008) US$ 968,126,000 716,165,000 212,987,720 74% 22% Total (2008) US$ 2,849,256,000 1,710,007,000 441,603,720 60% 15% Source: See References and Data Sources for a list of data sources. * Data for 2009 fiscal year unless indicated otherwise.

Table 4 Public broadcasters’ operating expenditures, 2009*

Share of total operating Operating expenditures (home currency) Home expenditures Country Broadcaster cur- Television Radio Television rency Total operations operations operations ABC A$ 1,101,074,000 641,926,142 209,204,060 58% Australia SBS A$ 264,650,000 235,538,500 29,111,500 89% Total A$ 1,365,724,000 877,464,642 238,315,560 64% Austria ORF € 995,000,000 ------VRT € 444,998,000 270,000,000 96,500,000 61% Belgium RTBF € 310,799,351 ------Total € 755,797,351 ------CBC|Radio- Canada Canada $ 1,790,000,000 1,232,000,000 347,000,000 69% Denmark Danmarks Radio Dkr. 3,337,900,000 ------Finland Yleisradio € 414,100,000 165,000,000 68,000,000 40% France Televisions € 3,049,400,000 3,049,400,000 0 100% France Radio France € 590,843,000 0 590,843,000 0% RFI € ------Total € 3,640,243,000 3,049,400,000 590,843,000 84% ZDF € 1,945,400,000 1,945,400,000 -- 100% ARD € ------Germany Deutschlandradio € ------Total € ------Ireland RTE € 385,515,000 227,514,000 67,763,000 59% Italy RAI € 3,213,300,000 ------Japan NHK ¥ 000s ------TVNZ NZ$ 374,645,000 374,645,000 0 -- RNZ NZ$ 38,187,000 0 38,187,000 -- New Zealand Maori Television NZ$ ------Total NZ$ 412,832,000 374,645,000 38,187,000 91% Norway NRK Nkr. 4,420,494,000 ------RTVE (Spain) € 1,012,600,000 ------Regional Spain broadcasters € 2,038,625,000 ------Total € 3,051,225,000 ------Sveriges Television Skr. 3,794,100,000 3,794,100,000 0 100% Sweden Sveriges Radio Skr. 2,283,100,000 0 2,283,100,000 0% UR-Educational Skr. 323,175,000 ------Total Skr. 6,400,375,000 ------Switzerland SRG-SSR Sfr. 1,608,900,000 ------BBC £ 4,509,900,000 2,351,400,000 603,800,000 52% Channel 4 £ 826,400,000 778,700,000 0 94% U.K. S4C £ 104,663,000 104,663,000 0 100% Total £ 5,440,963,000 3,234,763,000 603,800,000 59% US public television (2008) US$ ------U.S. US public radio (2008) US$ ------Total (2008) US$ ------Sources: See References and Data Sources for a list of data sources. * Data for 2009 fiscal year unless indicated otherwise

In Table 5 we provide data on public broadcasters’ new-platform revenues and expenses. We note that new-platform data were only available from public reports for 12 of the 32 public broadcasters included in our research. These 12 datasets provide us with partial data on new-platform revenues or expenses in 9 of the 18 comparison countries. We also note that the precise definition of new-platform operations can vary from broadcaster to broadcaster. For example, public broadcasters’ definitions of online or Internet revenues or expenses may differ. As such, the new-platform statistics may not be directly comparable across broadcasters. Table 5 Public broadcasters’ new-platform revenues and expenses, 2009*

Operating revenues Operating expenditures Home Share of Country Broadcaster cur- Amount Amount Share of total rency (home (home total operating operating currency) currency) expenditures revenues ABC A$ -- -- 18,301,160 1.7% Australia SBS A$ 1,828,000 0.6% 2,393,000 0.9% Total A$ ------Austria ORF € ------VRT € 19,646,000 4.4% 13,400,000 3.0% Belgium RTBF € 654,000 0.2% -- -- Total € ------CBC|Radio- Canada Canada $ ------Denmark Danmarks Radio Dkr. ------Finland Yleisradio € ------France Televisions € ------France Radio France € ------RFI € ------Total € ------ZDF € -- -- 22,900,000 1.2% ARD € ------Germany Deutschlandradio € ------Total € ------Ireland RTE € 2,464,000 0.7% 5,177,000 1.3% Italy RAI € 15,800,000 0.5% 14,000,000 0.9% Japan NHK ¥ 000s 295,121 0.04% -- -- TVNZ NZ$ 4,425,000 1.1% 5,456,000 1.5% RNZ NZ$ ------New Zealand Maori Television NZ$ ------Total NZ$ ------Norway NRK Nkr. ------RTVE (Spain) € ------Regional Spain broadcasters € ------Total € ------Sveriges Television Skr. ------Sweden Sveriges Radio Skr. ------UR-Educational Skr. ------Total Skr. ------Switzerland SRG-SSR Sfr. ------U.K. BBC £ -- -- 199,300,000 4.4%

Channel 4 £ 32,800,000 4.0% 26,600,000 3.2% S4C £ ------Total £ ------US public television (2008) US$ 36,000,000 1.9% -- -- U.S. US public radio (2008) US$ ------Total (2008) US$ ------Sources: See References and Data Sources for a list of data sources. * Data for 2009 fiscal year unless indicated otherwise.

Appendix B - Potential Benefits Analysis As a further element in making an international comparison, we postulated the potential benefits to a country that a public broadcaster can provide, and rated the 18 Western countries as to how valuable these benefits would be to that country. We then compared each country’s rating in this benefits calculation to its per-capita level of public funding for public broadcasting. This comparison helped us identify which Western countries are possibly under-funding their public broadcasters, when the public broadcaster could be delivering substantial benefits in that country’s particular socio-political circumstances. This benefits assessment required a broad review of the social, political and cultural environment, as well as the media-industry structure in each country. While this assessment was qualitative in many respects, it was systematic in terms of comparative analysis. We selected indicators that could be considered indicative of the relevant socio-political conditions for each country. For each indicator we used a simple five-grade scale (high to low) for rating each country. While this approach did not eliminate subjectivity, it did force a discipline to the ranking of the countries. We undertook basic research of some 18 countries to compare them to Canada along the following four criteria and associated indicators. For each indicator we were able to obtain specific data in order to establish the scale for a relative scoring for each country.

Criteria Indicators 1. Promotion of culture and common ! Population density values ! Number of broadcasting languages – number of official languages broadcast by the public broadcasting services (note: must be rough equivalency in broadcast, not just occasional minority programming broadcast) ! Ethnic-diversity challenges (third-party risk ratings) 2. Relative size of domestic language ! Population of country or population of various official language market groups within a single country 3. Proximity to a large larger country ! Countries bordering countries of similar language with a much with the same language larger economy ! Countries whose mother tongue is English (which are subject to greater pressure from American programming, even if not bordering on the U.S.) 4. Audience appeal of indigenous ! The number of indigenous programs’ among the top ten programs programming

Based on these four criteria, we rated each country against six different indicators on a five-point scale. The details of the scoring systems and the data used to derive the scores are presented in Appendix B. In summary: ! A rating of high and a numerical score of five was assigned when the indicators pointed to an environment where a public broadcaster could potentially generate relatively high benefits to its citizens. ! A rating of medium and a numerical score of three was assigned when the indicators pointed to an environment where a public broadcaster could potentially generate a relatively moderate level of benefits. ! A rating of low and a numerical score of one was assigned when the indicators pointed to an environment where a public broadcaster could generate a relatively modest benefit. Countries could also obtain scores of two or four. We did not weight the indicators or the criteria in terms of level of importance, and recognize that not doing so is somewhat arbitrary. Nevertheless, this approach provides a systematic basis for gauging and comparing each country’s environment, and thereby the relative benefit that a public broadcasting could bring to the country. To assess the potential benefits that a public broadcaster could bring to each of the Western countries included in the analysis, we rated each country on the basis of six indicators. Against each indicator we assigned each country a score on a scale of one to five. The tables in this appendix outline the rating schemes, the data used to arrive at each country’s ratings, and the aggregate rating for each country. Table 6 Rating scale for population density Population density Potential Rating Number of inhabitant per benefit square kilometre High 5 <25 4 25 to 50 3 50 to 75 2 75 to 100 Low 1 >100

Table 7 Rating scale for the number of broadcasting languages Potential Number of broadcasting Rating benefit languages High 5 3 or more 3 2 Low 1 1

Table 8 Rating scale for the level of ethnic-diversity challenges Potential PRS Group Inc. rating of Rating benefit ethnic tensions High 5 1.0 to 1.9 4 2.0 to 2.9 3 3.0 to 3.9 2 4.0 to 4.9 Low 1 5.0 to 6.0 Note: PRS Group Inc. assigned each country a rating on a six- point scale, based on the level of ethnic tensions within the country. Please see http://www.prsgroup.com for more information

Table 9 Rating scale for the size of the domestic language market

Potential Size of domestic language Rating benefit market High 5 < 10 million 4 11 million to 50 million 3 51 million to 100 million 2 101 million to 200 million Low 1 >201 million

Table 10 Rating scale for proximity to a larger country with the same language and/or broadcast programming in English Potential Rating Proximity situations benefit The country is adjacent to a larger country with which it shares High 5 the same language. The country is adjacent to a larger country with which it shares 4 one official language. The country is not adjacent to a larger country with which it shares a language, but it does broadcast programming in 3 English and thus faces competition from imported American programming. 2 --

The country is not adjacent to a larger country with which it Low 1 shares a language.

Table 11 Rating scale for audience appeal of indigenous programming Number of indigenous Potential Rating programs within the top ten benefit programs High 5 0 to 2 4 3 or 4 3 5 or 6 2 7 or 8 Low 1 9 or 10

Table 12 Potential-benefits analysis data and ratings

Population Density (inhabitants Multiple number of broadcasting Ethnic diversity challenges (2009) per square kilometre) languages

Data Score Data Score Data Score

1language: PRS Group Australia 2.8 5 English 1 rating = 4.0 2 1 language: PRS Group Austria 100.2 2 German 1 rating = 4.0 2 2 languages: French and PRS Group Belgium 353.8 1 Dutch 3 rating = 3.0 3 2 languages: English and PRS Group Canada 3.4 5 French 3 rating = 3.5 3 1 language: PRS Group Denmark 127.6 1 Danish 1 rating = 4.0 2 1 language: Finnish. Swedish speaking PRS Group Finland 15.7 5 minority (8%) 1 rating = 6.0 1 1 language: PRS Group France 114.4 1 French 1 rating = 2.5 4 1 language: PRS Group Germany 229.7 1 German 1 rating = 4.0 2 2 languages: PRS Group Ireland 64.0 3 English Irish 3 rating = 5.5 1 1 language: PRS Group Italy 200.2 1 Italian 1 rating = 4.5 2 1 language: PRS Group Japan 337.7 1 Japanese 1 rating = 5.5 1 1 language: PRS Group New Zealand 16.0 5 English 1 rating = 3.5 3 1 language: Norwegian (small Sami PRS Group Norway 14.8 5 minority) 1 rating = 4.5 2 3 languages: Spanish, Catalan (17%), Galician (7%), and PRS Group Spain 92.9 2 Basque (2%). 5 rating = 4.0 2 1 language: Swedish. (Some broadcasting in PRS Group Sweden 20.7 5 Sámi) 1 rating = 5.0 1 3 languages: German, French PRS Group Switzerland 188.9 1 and Italian. 5 rating = 4.0 2 1 language: PRS Group U.K. 252.4 1 English 1 rating = 4.0 2 1 language: PRS Group U.S. 31.9 4 English 1 rating = 5.0 1 Source: Nordicity Group analysis and PRS Group Inc.

Table 13 Potential-benefits analysis data and ratings (continued)

Proximity to a larger country Relative size of domestic with the same language, and/or Audience appeal of language market (population) broadcast programming in indigenous programming English

Data Score Data Score Data Score

No, but faces competition from imported English,- language 9 out of 10 Australia 21,900,000 4 programming 3 (1 from US) 1 Austria 8,400,000 5 Yes. Germany 5 10 out of 10 1 North Belgium: 10/10; South Yes. France (for Belgium: 8/10; French); Average Netherlands (for (50/50): Belgium 10,800,000 5 Dutch/Flemish) 4 9 out of 10 1 English- speaking Canada: 1/10; French-speaking Canada: 10/10; Yes. United Average (3/4 Canada 33,700,000 4 States 5 and 1/4): 3.3 4 9 out of 10 Denmark 5,500,000 5 No. 1 (1 Eurovision) 1 8 out of 10 Finland 5,300,000 5 No. 1 (1 Eurovision) 2 6 out of 10 France 62,600,000 3 No. 1 (3 from US) 3 9 out of 10 Germany 82,000,000 3 No. 1 (1 US/UK movie) 1 9 out of 10 Ireland 4,500,000 5 Yes. England 4 (1 from UK) 1 Italy 60,300,000 3 No. 1 10 out of 10 1 Japan 127,600,000 2 No. 1 10 out of 10 1 8 out of 10 (2 from New Zealand 4,300,000 5 Yes. Australia. 5 Australia) 2 9 out of 10 Norway 4,800,000 5 No. 1 (1 Eurovision) 1 9 out of 10 Spain 46,900,000 4 No. 1 (1 Eurovision) 1 9 out of 10 Sweden 9,300,000 5 No. 1 (1 from US) 1 German- speaking: 10/10; French- speaking:9/10; Italian-speaking: 8/10; Average Yes. Germany, (1/3,1/3,1/3): Switzerland 7,800,000 5 Italy, France. 5 9/10 1 U.K. 61,800,000 3 No. 3 10 out of 10 1

U.S. 306,800,000 1 No. 1 10 out of 10 1 Source: Nordicity Group analysis.

Table 14 Potential-benefits analysis aggregate ratings

Proximity to a larger Relative country with Multiple Audience Ethnic size of the same Population number of appeal of Aggregate diversity domestic language, Density broadcasting indigenous rating challenges language and/or languages programming market broadcast programming in English Australia 5 1 2 4 3 1 16 Austria 2 1 2 5 5 1 16 Belgium 1 3 3 5 4 1 17 Canada 5 3 3 4 4 4 23 Denmark 1 1 2 5 1 1 11 Finland 5 1 1 5 1 2 15 France 1 1 4 3 1 3 13 Germany 1 1 2 3 1 1 9 Ireland 3 3 1 5 4 1 17 Italy 1 1 2 3 1 1 9 Japan 1 1 1 2 1 1 7 New Zealand 5 1 3 5 5 2 21 Norway 5 1 2 5 1 1 15 Spain 2 5 2 4 1 1 15 Sweden 5 1 1 5 1 1 14 Switzerland 1 5 2 5 5 1 19 U.K. 1 1 2 3 3 1 11 U.S. 4 1 1 1 1 1 9 Source: Nordicity Group analysis.

Appendix C - Estimation of Annual Revenue Impact of Simultaneous Substitution The revenue impact of simultaneous substitution has been the subject of several previous analyses by Arthur Donner and various co-authors. ! In 1983, Donner and Mel Kilman published the first estimate of the revenue impact of simultaneous substitution. In that report, Donner and Kilman estimated that simultaneous substitution generated $21.1 million in net advertising revenues for Canadian stations in 1982.4 This amount represented 3.1% of total advertising revenues of private television broadcasters in that year. ! In 1986, Donner prepared an update to his estimate of simultaneous substitution’s revenue impact. He found that the revenue impact of simultaneous substitution had grown to $52.7 million in 1984.5 ! In 1990, the Department of Communications commissioned Donner to prepare another update on the revenue impact of simultaneous substitution. Donner concluded that simultaneous substitution generated an estimated $67.3 million in incremental advertising revenues for Canadian broadcasters in 1988.6 ! In 1994, the Canadian Cable Television Association commissioned Donner and Fred Lazar to again estimate the revenue impact of simultaneous substitution. Donner and Lazar found that simultaneous substitution generated incremental advertising revenues of between $114 million and $159 million during the 1992/93 broadcasting year.7 ! Donner’s most recent work on this topic was in 1997. In that year he and Fred Lazar derived a single estimate of $147.6 million for the dollar value of airtime sales during the 1996/97 broadcasting, which were transferred to Canadian English-language television broadcasters because of simultaneous substitution.8 Table 15 Estimated values of simultaneous substitution

1982 1984 1988 1992/93 1996/97

Incremental revenue impact of simultaneous substitution ($ millions) 21 52.7 67.3 114 to 159 147.6

Source: 1982 data from Donner and Kilman, 1983; 1984 data from Donner, 1986; 1998 data from Donner, 1990; 1992/93 data from Donner and Lazar, 1994; 1997 data from Donner and Lazar, 1997. For this report, we sought to generate an update to Donner and Lazar’s 1996/97 estimate of the revenue

4 Arthur Donner and Mel Kilman, Television Advertising and the Income Tax Act: An Economic Analysis of Bill C-58, prepared for the Department of Communications, November 1983. 5 Arthur Donner, An Analysis of the Importance of U.S. Television Spillover, Bill C-58 and Simulcasting Policies for the Revenues of Canadian TV Broadcasters, Taskforce on Broadcasting, February 1986 (mimeograph). 6 Arthur Donner, The Financial Impacts of Section 19.1 of the Income Tax Act (Bill C-58) and Simultaneous Substitution, (Her Majesty the Queen in Right of Canada as represented by the Minister of Communications, 1990). 7 Arthur Donner and Fred Lazar, Cable, Canadian Program Production and the Information Highway, discussion paper prepared for the CCTA, August 1994. 8 Arthur Donner and Fred Lazar, The Financial Effects of Simulcasting on Canadian TV Broadcasters, June 1997.

impact of simultaneous substitution by extrapolating it to the 1990/91-to-2008/09 period.9 Donner and Lazar used a bottom-up approach that calculated the tuning transferred to Canadian broadcasters due to simulcast programs, and married this with advertising rates to arrive at a dollar estimate of airtime sales for simultaneous substitution. For our extrapolation, we used what could be considered a top-down approach. In other words, we examined the share of overall conventional television advertising revenues in 1996/97 that could be attributed back to simultaneous substitution, and then applied this share to the television broadcasting markets during the 1997/98-to-2006/07 period. Along the same lines, we also prepared a back-cast for 1990/91 to 1995/96. In doing this, however, we developed two scenarios. In one scenario, the status-quo scenario, we assumed that the extent of simulcasting on Canadian television screens did not change between 1996/97 and 2008/09. We also developed a second simulcasting-growth scenario in which we incorporated an assumption that simulcasting activity increased between 1996/97 and 2003/04. For the back-cast we only applied the status quo scenario; we assumed no changes in simulcasting. In 1996/97, total advertising revenues among English-language private conventional television licensees were $1,333 million. Simultaneous substitution revenues of $147.6 million represented 11.1% of the total advertising sales in the English-language private conventional television market. Donner and Lazar’s 1996/97 estimate included the incremental revenues earned by CBC|Radio-Canada affiliates and CBC|Radio-Canada; but the amounts were small, $1.5 million and $630,000, respectively. Removing the small amount attributed to CBC|Radio-Canada, reduces the 1996/97 amount to $147.0 million, or approximately 11.0% of total English-language private conventional advertising sales. We used an analogous approach for the back-cast of the status quo scenario. We estimated the annual value of simultaneous substitution by calculating 11.0% of annual levels of the advertising revenues of English-language private conventional broadcasters. Between 1996/97 and 2006/07, advertising revenues in the English-language private conventional television market grew by 28.8% to a total of $1,609 million. To derive the status-quo estimate, we assumed that simultaneous substitution revenues continued to represent 11.0% of the relevant advertising market between 1997/98 and 2006/07. With this assumption, the revenue impact of simultaneous substitution grew from $159 million in 1997/98 to $189 million in 2006/07. In effect, under this scenario, the annual revenue impact of simultaneous substitution grew in step with overall television advertising sales in the English-language private conventional television market. While the status-quo estimate is straight forward and very plausible, there are indications that there was more simulcasting on Canadian television in 2006/07 than there was in 1996/97. The rationale for this: More Canadian broadcasters started to engage in simultaneous substitution during this period. Between 1996/97 and 2006/07, Canada’s third-largest English-language private conventional broadcasting group, CHUM Television, started to acquire prime-time American programming that was not a major part of its stations’ schedules in 1997. What’s more, CH (CanWest MediaWorks Inc.’s second network) also started acquiring more simulcast American programming during this period. To gauge and quantify the increase in simultaneous substitution, we enlisted CBC|Radio-Canada Research to prepare sample schedules from November 1997 and November 2003. Based on these schedules, CBC|Radio-Canada Research tabulated the total number of hours of simulcast American programming in Canada’s two major English-language television markets – Toronto and Vancouver – during a four-week period in November 1997 and November 2003.

9 This extrapolation included a back-cast for the years, 1990/91 to 1995/96.

The comparison of simulcasting in these two markets showed the number of hours of simulcasting in the Toronto market increased by 16%; in the Vancouver market it increased by 19%. In both markets, a large part of the increase in simulcasting can be traced back to the entry of new broadcasters into the respective markets. In Toronto, SunTV entered the market; while in Vancouver, City-TV, A-Channel, and Channel M have come on air since 1997. Table 16 Comparison of simulcast activity in the Toronto and Vancouver markets, 1997 and 2003

Hours of simulcast American television programs during a four-week sample period Percentage change

November 1996 November 2003

Toronto Global Television 70.0 62.5 (11%) CTV 65.5 62.0 (5%) CBLT-CBC 2.0 0.0 (100%) City-TV 15.5 20.5 32% New VR / A-Channel 20.5 38.0 85% CHCH 57.0 60.5 (6%) CFMT / Omni2 8.0 10.0 25% Sun TV -- 23.0 n.a. Total 238.5 276.5 16% Vancouver Global 81.0 65.5 (19%) CIVT (VTV / CTV) 46.5 61.5 32% CBUT-CBC 2.0 0.0 (100%) CHEK / CH Vancouver Island 35.0 77.5 121% City-TV -- 18.0 n.a. CIVI / A Channel -- 21.0 n.a. Channel M -- 19.5 n.a. BCTV 56.5 -- n.a. Total 221.0 263 19%

Grand total 459.5 539.5 17% Source: CBC|Radio-Canada Research. n.a. – not applicable

A 17% increase in simulcast hours of programming does not necessarily translate into a 17% increase in advertising revenues from simultaneous substitution. This increased programming should increase supply somewhat and put some downward pressure on average airtime rates. With this in mind, we have used an assumption of 12% (approximately 70% of the total rate of growth) to represent the incremental advertising revenues brought in by more simultaneous substitution activity in 2003/04. To estimate the incremental impact for the interim years – 1997/98 to 2002/03 – we assumed a scenario of linear growth. Under this simulcasting-growth scenario, then, the annual revenue impact of simultaneous substitution was $162 million in 1997/98, and grew to $199 million in 2003/04. By 2003/04, it was 12% higher than the status-quo estimate of $177 million. From 2003/04 to 2009/10, we assumed that there was no further growth in broadcasters’ simulcasting activity. With this assumption, the annual revenue impact of simultaneous substitution grew to a peak of $212 million in 2006/07, before decreasing to $188 million in 2008/09 – or 12.0% of higher than the status quo estimate for 2008/09.

Table 17 Estimates of revenue impact of simultaneous substitution

Base Back-cast Extrapolation year ($ millions) 1990/ 1991 1992 1993 1994 1995/ 1996/ 1997 1998 1999/ 2000/ 2001/ 2002/ 2003/ 2004/ 2005/ 2006/ 2007 2008/ 91 /92 /93 /94 /95 96 97 /98 /99 00 01 02 03 04 05 06 07 /08 09 Total advertising revenues in English-language private conventional television market ($ millions) 1,042 1,129 1,115 1,143 1,203 1,244 1,333 1,445 1,459 1,468 1,493 1,458 1,611 1,614 1,683 1,693 1,717 1,679 1,520 Simultaneous substitution revenues - Status quo scenario (11% of total advertising revenues in English-language private conventional market ($ millions) 115 125 123 126 133 137 147 159 161 162 165 161 178 178 186 187 189 185 168 Simultaneous substitution revenues - Simulcast-growth scenario ($ millions) 115 125 123 126 133 137 147 162 166 170 176 175 196 199 208 209 212 207 188 Incremental revenues in simulcast-growth scenario in relation to status 12.0 quo scenario 0% 0% 0% 0% 0% 0% 0% 1.7% 3.4% 5.1% 6.9% 8.6% 10.3% 12. 0% 12.0% 12.0% 12.0% % 12.0% Source: Nordicity calculations based on Donner and Lazar methodology, and Donner and Lazar results for 1996/97.

Appendix D - Estimation of Value of Section 19.1 Like simultaneous substitution, the economic impact of section 19.1 of the Income Tax Act has been the subject of several previous analyses by Arthur Donner and various co-authors. ! In 1979, Donner and Fred Lazar prepared the first estimate of the monetary value of section 19.1. In that report, Donner and Lazar found that section 19.1 increased Canadian broadcasters’ advertising sales by $16.2 million in 1977 and $23.2 million in 1978.10 ! In 1983, Donner and Mel Kilman published an updated estimate for the economic value of section 19.1. They estimated that section 19.1 led to between $28.2 million and $32.7 million in additional advertising revenues for Canadian broadcasters in 1982.11 ! In 1986, Donner prepared another update. He estimated that section 19.1 had generated $35.8 million to $41.8 million in additional revenues in 1984.12 ! Donner’s most recent work on this topic was in 1990. In that year, the Department of Communications commissioned Donner to prepare a report on the economic value of simultaneous substitution and section 19.1. Donner concluded that section 19.1 generated an estimated $67.3 million in incremental advertising revenues for Canadian broadcasters in 1988.13 With the most recent estimate for the value of section 19.1 being from 1988, we set out to develop estimates for the broadcast years 1990/91 through 2008/09, by applying Donner’s methodology to the broadcasting markets in each of these years. Table 18 Estimates of impact of section 19.1, 2004 Revenue 1975 Market 10% Market 15% Market Growth Share Share Share Assumption Total potential losses of U.S. border stations ($ millions) 115 149 193 241 Source: Nordicity estimates based on methodology from Donner and 2004 statistics from CRTC.

To derive the 1988 estimate, Donner essentially simulated the U.S. broadcaster revenues in 1988 based on four different scenarios for U.S. station revenue from Canadian advertisers. 1. U.S. stations maintain their 1975 market share (before Bill C-58) of 7.1% of total conventional television advertising expenditures. 2. U.S. stations’ share of conventional television advertising expenditures in Canada grows by the same rate as private conventional television advertising revenues in Canada. 3. U.S. stations increase their market share in Canada to 10%. 4. U.S. stations increase their market share in Canada to 15%.

10 Donner and Lazar, 1979. 11 Arthur Donner and Mel Kilman. Television Advertising and the Income Tax Act: An Economic Analysis of Bill C-58. Prepared for the Department of Communications, November 1983. 12 Donner, 1986. 13 Arthur Donner. The Financial Impacts of Section 19.1 of the Income Tax Act (Bill C-58) and Simultaneous Substitution. Her Majesty the Queen in Right of Canada as represented by the Minister of Communications. 1990.

Donner selected scenarios two and three from among these four scenarios, to construct the low- and high-end ranges for his 1988 estimate. In 1975, immediately prior to the implementation of section 19.1, American border stations accounted for $16.5 million or 7.1% of Canada’s total expenditures on private conventional television advertising. The estimates under each scenario represent the potential or projected loss experienced by American border stations because of section 19.1. However, as Donner points out, part of this loss was due to simultaneous substitution and not section 19.1, per se. Donner suggests that about 20% of the value of simultaneous substitution can be traced back to lost advertising sales by the border stations. The remaining 80% of the simultaneous-substitution impact can be attributed back to American network advertising. As such, he reduces his section 19.1 estimates by 20% of the simultaneous substitution estimate in order to arrive at a residual estimate of impact of section 19.1. Using Donner’s methodology, we estimated that section 19.1 generated advertising revenues of between $88 million and $122 million for Canadian private conventional television broadcasters in the English- language market in 1995/96. To arrive at this range estimate, we derived scenarios two and three for the 1995/96 broadcasting year, and then removed the effect of simultaneous substitution. We applied this approach to each year during the 1990/91-to-2008/09 period and found that the revenue impact of section 19.1 was between $88 million (Scenario 2: revenue growth scenario) and $125 million (Scenario 3: ten percent market share scenario) in 2008/09. Donner’s Scenario 2 suggests that American border stations’ Canadian revenues would grow in step with the growth of private conventional television advertising revenues in Canada. Between 1975 and 1995/96, the advertising revenues of Canada’s private conventional television broadcasters increased by approximately seven-fold from $214 million to $1,497 million. In 1975, American border stations garnered $16.5 million in Canadian advertising revenues. By multiplying the 1975 amount by seven, one obtains an estimate of $115 million for 1995/96. The Scenario 3 estimate is simply $1,497 million multiplied by 10%, or $150 million. We repeated the above process for each broadcasting year during the 1990/91-to-2008/09 period, and found that under Scenario 2, the revenue impact grew from $97 million in 1990/91 to $139 million in 2008/09. Under Scenario 3, the revenue impact grew from $126 million in 1990/91 to $181 million in 2008/09. The next step in the calculation required us to remove the estimate for the American border stations’ lost revenue due to simultaneous substitution. As described in Appendix B, we calculated two estimates for the value of simultaneous substitution. To simplify our analysis we multiplied these amounts by 20% and used the midpoint of the resulting range, to represent the portion of American border stations’ lost revenue that would have been lost due to simultaneous substitution. Based on this approach, the portion of the revenue impact attributed to simultaneous substitution was $23 million in 1990/91, growing to $36 million in 2008/09. Donner’s 1990 estimate of the revenue impact of section 19.1 did not distinguish between private conventional broadcasters and the CBC|Radio-Canada. As such, one final adjustment needed to be made to the estimate in order to account for CBC|Radio-Canada’s share of the English-language conventional television advertising market. In 2008/09, CBC|Radio-Canada earned $188 million in advertising revenues; this represented 11% of total conventional television advertising revenues in the English-language conventional television market. To account for the CBC|Radio-Canada’s share of the advertising, we have

reduced each estimate by 11% of the total potential loss of U.S. border stations (i.e., $139 million in Scenario 2 in 2008/09 and $204 million in Scenario 3 in 2008/09). Therefore, by applying Donner’s methodology to the 2006/07 television advertising market, and removing CBC|Radio-Canada from the amount, we derived the following estimates for the incremental revenue impact of section 19.1. ! Under the revenue-growth scenario (Scenario 2), the advertising-revenue impact increased from $58 million in 1990/91 to $88 million in 2008/09. ! Under the 10%-market-share scenario (Scenario 3), the advertising-revenue impact increased from $81 million in 1990/91 to $125 million in 2008/09.

Table 19 Estimates of revenue impact of section 19.1

Revenue growth assumption scenario Total potential losses of U.S. border stations 97 104 104 106 112 115 123 133 135 136 138 135 149 150 155 156 157 154 139 U.S. border station losses due to simultaneous substitution [Note 1] 23 25 25 25 27 27 29 32 33 33 34 34 37 38 39 40 40 39 36 Estimated losses of U.S. border stations due to section 19.1 74 80 80 81 85 88 94 101 102 103 104 102 111 112 116 116 117 115 104 CBC’s share of advertising market 17 17 16 15 16 19 17 20 17 16 17 17 16 18 11 18 17 20 16 Revenue gains for private conventional television broadcasters due to section 19.1 58 63 64 66 70 69 77 81 85 87 87 84 96 94 104 98 101 95 88 Ten percent market share scenario Total potential losses of U.S. border stations 126 136 135 138 145 150 160 173 175 176 179 176 193 194 201 202 204 200 181 U.S. border station losses due to simultaneous substitution [Note 1] 23 25 25 25 27 27 29 32 33 33 34 34 37 38 39 40 40 39 36 Estimated losses of U.S. border stations due to section 19.1 103 111 111 113 119 122 131 141 142 143 145 142 156 156 162 162 164 161 145 CBC’s share of advertising market 21 22 21 20 21 24 22 25 22 20 22 23 20 24 15 24 22 26 20 Revenue gains for private conventional television 81 89 90 93 98 98 109 115 120 123 122 119 135 133 147 139 142 135 125

broadcasters due to section 19.1 Source: Nordicity estimates based on methodology from Donner (1990) and statistics from CRTC and CBC. Notes: (1) Equal to 20% of total value of simultaneous substitution (see Appendix C).

Appendix E - Statistics for Federal Government Expenditures Table 20 Federal government expenditure statistics

Total federal Total federal government government expenditures on National Defence Debt payments expenditures operations and (less National Defence Fiscal year programs ($ 000s) ($ 000s) and debt payment)

($ 000s) ($ 000s) A B C =A!(B+C) 1990/91 158,810,000 12,307,000 42,484,000 104,019,000 1991/92 168,718,000 11,862,000 41,139,000 115,717,000 1992/93 171,474,000 11,956,000 39,292,000 120,226,000 1993/94 169,709,000 12,564,000 37,899,000 119,246,000 1994/95 173,383,000 12,244,000 41,927,000 119,212,000 1995/96 175,765,000 11,938,000 46,692,000 117,135,000 1996/97 166,041,000 10,949,000 44,916,000 110,176,000 1997/98 160,672,000 10,354,000 43,443,000 106,875,000 1998/99 166,593,000 10,449,000 43,967,000 112,177,000 1999/00 173,337,000 11,869,000 44,140,000 117,328,000 2000/01 184,612,000 11,968,000 45,650,000 126,994,000 2001/02 184,941,000 12,576,000 40,139,000 132,226,000 2002/03 189,249,000 12,818,000 36,473,000 139,958,000 2003/04 197,272,000 13,304,000 34,670,000 149,298,000 2004/05 207,128,000 14,360,000 32,753,000 160,015,000 2005/06 215,293,000 15,075,000 32,076,000 168,142,000 2006/07 223,989,000 16,096,000 32,045,000 175,848,000 2007/08 240,461,000 17,925,000 31,225,000 191,311,000 2008/09 236,474,000 17,347,000 28,982,000 190,145,000 Source: Statistics Canada, CANSIM, matrix 325-0002.

Table 21 Federal government expenditures on culture

Total federal government Federal government expenditures on culture and CBC parliamentary appropriation expenditures on culture and broadcasting broadcasting less CBC ($ 000s) parliamentary appropriation Fiscal year ($ 000s) ($ 000s) A B =A!B 1990/91 2,203,000 1,078,430 1,124,570 1991/92 2,279,000 1,031,037 1,247,963 1992/93 2,405,000 1,109,746 1,295,254 1993/94 2,212,000 1,089,746 1,122,254 1994/95 2,253,000 1,093,852 1,159,148 1995/96 2,040,000 1,170,689 869,311 1996/97 2,011,000 997,133 1,013,867 1997/98 1,973,000 806,485 1,166,515 1998/99 2,079,000 896,435 1,182,565 1999/00 2,195,000 879,187 1,315,813 2000/01 2,303,000 902,074 1,400,926 2001/02 2,373,000 982,885 1,390,115 2002/03 2,650,000 1,046,522 1,603,478 2003/04 2,890,000 1,066,311 1,823,689 2004/05 2,961,000 1,036,528 1,924,472 2005/06 2,874,000 1,098,000 1,776,000 2006/07 2,944,000 1,114,000 1,830,000 2007/08 2,986,000 1,104,000 1,882,000 2008/09 3,094,000 1,170,814 1,923,186 Source: Statistics Canada, CANSIM, matrix 325-0002 and CBC|Radio-Canada.